Ethanol, gasoline prices flip flop

November was an interesting study of both the ethanol and gasoline markets, as trends in both markets from the past several months reversed. The ethanol price has dropped nearly 20 cents per gallon, giving up its 15 cent premium on the gasoline market.

The RBOB gasoline market gained nearly 20 cents per gallon in November, as it trades at a strong premium to the ethanol futures once again. This reversal comes from not only the corn market fall, but also the redeveloping of commercial and noncommercial buying interest in the energy market. Traders continue to focus on commodities in expectation that the economy will continue to build through the first half of 2011, bringing increased demand for gasoline. This could drive additional ethanol demand, as increased overall usage of gasoline would support increased blending.

Corn prices continued to move in a moderate range over the past several weeks, as concerns of overall global economies have created havoc in the market. In turn, ethanol prices will likely continue to bounce higher and lower—following the corn market. Interest will likely be focused on the noncommercial buying activity in the grain market, rather than any direct movement of overall commercial market needs.

source: ethanolproducer